Institutional investors may adopt severe steps after Virco Mfg. Corporation's (NASDAQ:VIRC) latest 11% drop adds to a year losses

Key Insights

• Institutions' substantial holdings in Virco Mfg implies that they have significant influence over the company's share price
• The top 7 shareholders own 51% of the company
• Recent purchases by insiders

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To get a sense of who is truly in control of Virco Mfg. Corporation (NASDAQ:VIRC), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 51% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$114m last week after a 11% drop in the share price. The recent loss, which adds to a one-year loss of 51% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Virco Mfg which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of Virco Mfg.

View our latest analysis for Virco Mfg

What Does The Institutional Ownership Tell Us About Virco Mfg?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Virco Mfg already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Virco Mfg's earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Virco Mfg. With a 20% stake, CEO Robert Virtue is the largest shareholder. With 8.1% and 5.7% of the shares outstanding respectively, Minerva Advisors LLC and Douglas Virtue are the second and third largest shareholders. Interestingly, the third-largest shareholder, Douglas Virtue is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

We did some more digging and found that 7 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Virco Mfg

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in Virco Mfg. Corporation. Insiders have a US$39m stake in this US$114m business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 15% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Virco Mfg better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Virco Mfg you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.